Trump Acknowledges That The 'Replacement' Of Obamacare Will Span Years

Donald Trump sits at his desk as he waits for White House Chief of Staff Reince Priebus to deliver three executive orders for his signature, Jan. 23, 2017. (AP Photo/Evan Vucci)

Donald Trump's pre-Super Bowl interview with Bill O’Reilly last night was relatively brief (less than 10 minutes) and not surprisingly, Obamacare made the short list of topics. The full video is available online (here), and while a lot of ground was covered, Mr. O’Reilly had virtually no time to follow up or to dig very deep–so he didn’t. The sequence of the topics itself was interesting, and Obamacare appeared toward the end:

Nomination of Judge Gorsuch to the Supreme Court

The Muslim ban

Russian President Vladimir Putin

The border wall with Mexico

Sanctuary cities and states

Alternative facts and voter fraud

A tax cut

Obamacare

The surprise at getting elected

A football prediction ("Patriots would win by 8"–they won by 6)

Touching on eight policy topics in less than 10 minutes definitely qualifies as a blistering pace, but there was some very real (and long-awaited) insight on the strategy to repeal and replace (or repair) Obamacare. Given the mystery surrounding the replacement of health insurance for millions of Americans, this was valuable insight into Trump's current thinking.

Bill O’Reilly: Can Americans in 2017 expect a new healthcare plan rolled out by the Trump Administration? This year?

President Trump: Yeah–in the process, and maybe it'll take 'til sometime into next year, but we are certainly going to be in the process–very complicated. Obamacare is a disaster. You have to remember–Obamacare doesn't work, so we are putting in a wonderful plan–it's statutorily–takes a while to get–we're going to be putting it in fairly soon–I think that, yes–uh–I would like say by the end of the year–uh–at least the rudiments, but we should have something within the year and the following year.

That exchange appeared at the 07:15-minute mark of the ten-minute video clip. The fractured response is typical of Trump when he's speaking ad-hoc and away from a teleprompter, but he clearly acknowledges that the replacement process will run into 2018. For millions with current Obamacare policies, this news alone will likely provide significant relief.

More generally, efforts to repeal and replace (or repair) Obamacare have been stalled because the challenges are not only daunting, they are almost impossible to reconcile with our exorbitantly high cost of healthcare. Ever since Trump’s election–and even years before–the GOP has been hoping, praying and grinding through the mechanics of a replacement strategy, but that trajectory is entirely dependent on an unnatural act for the GOP. The unnatural act is extending those expensive federal subsidies that are fully baked into Obamacare. That fact (well known to all health insurance companies) became official GOP reality just last week:

What we’re told is if we don’t act by March or April, is that in many states there won’t be an insurance company there to sell you insurance. It’s also an area where Republicans are going to have to do some things we may not normally do, like cost sharing or reinsurance. We may not like those things, but we may have to do those things for the next two to three years to make sure people can buy insurance.

The ACA created and supported a healthy individual market, but only in combination with sizeable federal subsidies. Ending these subsidies (a popular idea under the banner of repealing Obamacare) makes it easy for the carriers to simply walk away from the individual market. It’s already a relatively small and largely unprofitable book of business. Take away the federal subsidies (around cost sharing, risk corridors and reinsurance), and the insurance carriers won’t just walk away–they’ll run. They’ll run not because of any business cowardice, but because they have a fiduciary obligation to do just that. Shareholders would sue and boards would terminate executives for allowing a negative-margin business to exist for anything longer than about one full month.

In the course of one week, both the GOP and Trump finally acknowledged that all of this talk of repeal-and-replace (or now repair) will take a significant amount of time. That timeline was formalized by Trump tonight with the same vagueness that the GOP has always had. “We should have something within the year and the following year.” In other words, we don't really know how long this is going to take. At least he bought the GOP some time to wrestle with the actuarial math. As evidenced by this one chart, that battle isn’t winnable–but as a country–we continue to be very committed to fighting it.